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Some Year End Tax Planning Suggestions- Individuals - By John R. Bullis, CPA

Updated: Feb 21, 2023

The new tax law that applies for 2018 and later years has several changes for you to consider.

Maybe the best suggestion is to get a copy of your 2017 return handy and your estimate of 2018 income and deductions.

Then you can try to do a draft 2018 return to see what actions might be beneficial.

First, remember the tax rates and brackets have changed for 2018. But the tax on qualified dividends and long-term capital gains can still be zero, if the taxable income is less than $77,400 for a married couple or less than $38,700 for an individual.

If it looks like your taxable income for 2018 will be less than those amounts, maybe you could consider realizing some long-term capital gains before the year is over.

If you have some potential losses on stocks or other investments, maybe a sale would help reduce your income and your taxes. Capital losses offset capital gains and if the loss is big enough you may get a $3,000 deduction also (and excess losses carry over to next year).

Business owners have a potential 20% of profits deduction in 2018.

If you are eligible, maybe a contribution to a retirement plan will reduce your taxable income.

If you are age 70 ½ and have yet to take your required minimum distribution from a retirement plan, consider having the contribution go directly to a charity. That way there will be no income to report for the distribution, you meet the required minimum distribution rules and you do not get a charitable contribution deduction. But what if you will not itemize deductions in 2018? Then the direct to charity retirement plan distribution will be a benefit for you.

You might look at possible income and deductions for years after 2018 as well. Sometimes timing of income and payments of itemized deductions and various expenses can be helpful.

The Gift Tax Annual Exclusion (total amount of 2018 gifts to each person) is $15,000 plus amounts paid directly to educational institutions and medical providers for your beneficiary. Form 709, U.S. Gift Tax Return is not required to be filed if all your 2018 gifts qualify for the Annual Exclusion. If you give someone more than the Annual Exclusion, a form 709 is filed but unless your total taxable gifts are more than $11,200,000, there is no gift tax to be paid. The taxable gifts just reduce your death tax exemption. Maybe this is the year to do some gifts?

Did you hear “Even a short pencil is more reliable than the longest memory.”

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